The ACIT, Rajahmundry V. M/s Sree Murali Mohan Boiled and Raw Rice Mill Pvt. Ltd., Komaripalem

ITA 509/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8751 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SESHA SRINIVAS

Judgement Text

ITA NO.509/VIZAG/2016 M/S. SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT . LTD., KOMARIPALEM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.509/VIZAG/2016 ( / ASSESSMENT YEAR: 2011-12) ACIT, CENTRAL CIRCLE - 1, RAJAHMUNDRY M/S. SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT. LTD. KOMARIPALEM [PAN NO. AAHCS7870F ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI SESHA SRINIVAS, DR / RESPONDENT BY : SHRI G.V.N. HA RI, AR / DATE OF HEARING : 07.02.2018 / DATE OF PRONOUNCEMENT : 2 1.02.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3 {CIT(A)}, VI SAKHAPATNAM DATED 24.10.2016 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.509/VIZAG/2016 M/S. SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT . LTD., KOMARIPALEM 2 2. THE REVENUE FILED THE APPEAL RAISING THE FOLLOWI NG GROUNDS: 1. THE LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, ERRED IN ACCEPTING THE ASSESSEES PLEA THAT IT HAD MAINTAINE D SEPARATE BOOKS OF ACCOUNTS. 2. THE LD. CIT(A), IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, IS NOT CORRECT IN DECIDING THAT IT IS ONLY THE COST OF STEAM WHICH IS TO BE ALLOCATED BETWEEN RICE MILL AND POWER PLANT BUSINESS AND NOT THE COST OF HUSK, THE BASIC RAW MATERIAL. 3. GROUND NOS.1 & 4 ARE GENERAL IN NATURE WHICH DOE S NOT REQUIRE SPECIFIC ADJUDICATION. 4. GROUND NO.3 DOES NOT EMANATE FROM THE ORDER OF THE LD. CIT(A). IN THIS GROUND THE REVENUE HAS RAISED THE ISSUE WIT H REGARD TO FILING OF FORM NO.10CCB REPORT DURING THE COURSE SCRUTINY PRO CEEDINGS. NO SUCH ISSUE WAS DISCUSSED IN THE ORDER OF THE LD. CIT(A). THIS FACT HAS BEEN ADMITTED BY THE LD. D.R. DURING THE APPEAL PROCEEDI NGS. THEREFORE, GROUND NO.3 IS DISMISSED AS INFRUCTUOUS. 5. GROUND NO.2 IS RELATED TO THE ALLOCATION OF COS T OF HUSK BETWEEN THE STEAM GENERATION AND POWER PLANT. DURING THE AS SESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE AS SESSEE HAD CLAIMED THE DEDUCTION OF ` 2,70,92,891/- U/S 80IA OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). THE ASSESSEE IS RUNNING RICE MILL AND HAVING CAPTIVE POWER PLANT GENERATING STEAM AND POW ER. THE COMPANY HAS INSTALLED CAPTIVE POWER PLANT IN THE PREMISES O F RICE MILL AND PUT INTO OPERATION DURING THE ASSESSMENT YEAR 2004-05 AND SI NCE THEN THE ITA NO.509/VIZAG/2016 M/S. SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT . LTD., KOMARIPALEM 3 COMPANY WAS PRODUCING POWER AND STEAM AND THE SAME IS BEING UTILIZED INTERNALLY TO RUN THE RICE MILL. THE ASSESSEE HAS ALLOCATED 10% OF THE HUSK OF THE TOTAL HUSK UTILIZED AND THE REMAINING 9 0% OF THE HUSK COST BEING ALLOCATED TO THE GENERATION OF THE STEAM BY R ICE MILL IN ITS BOILED MILLING UNIT. THEREFORE, HUSK COST WAS PROPORTIONA TELY APPORTIONED TO POWER GENERATION UNIT TO RICE MILL. ACCORDINGLY, T HE ASSESSEE HAS COMPUTED THE NET PROFIT OF ` 2,51,17,309/- AGAINST THE ESTIMATED SALES OF POWER AT ` 3,68,52,300/- AND THE TOTAL EXPENDITURE AS WORKED OUT BY THE ASSESSEE WAS ` 1,17,34,991/-. THE A.O. NOT BEING SATISFIED WITH THE ALLOCATION MADE BY THE A.O, AFTER GOING THROUGH TH E ASSESSEES RECORD AND COMPARABLE CASES, ESTIMATED THE COST OF CONSUMP TION OF HUSK AT 55% OF THE TOTAL HUSK CONSUMED IN RELATION TO THE P OWER GENERATED BY THE POWER PLANT. ACCORDINGLY, RECOMPUTED THE PROFI T AT ` 2,02,44,192/- AND ALLOWED THE DEDUCTION. 6. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A), AND THE LD. CIT(A) ALLOWED THE A PPEAL OF THE ASSESSEE FOLLOWING THE ORDER OF THIS TRIBUNAL IN AS SESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 AND DIRECTE D THE A.O. TO ALLOCATE HUSK AT 10%. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, T HE LD. D.R. HAS ITA NO.509/VIZAG/2016 M/S. SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT . LTD., KOMARIPALEM 4 SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND T HE LD. A.R. RELIED ON THE ORDERS OF THIS TRIBUNAL IN THE ASSESSEES OWN C ASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 IN ITA NOS.48, 63, 325 & 342/VIZAG/2012 DATED 28.4.2014. THE HONBLE ITAT A FTER CONSIDERING THE ISSUE IN DETAIL AND THE ORDERS OF THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT ALLOCATION OF HUSK COST A T 10% IS REASONABLE. FOR READY REFERENCE, WE EXTRACT RELEVANT IN PARA NO .16 OF THE ORDER CITED (SUPRA) AS UNDER: 16. ON A CAREFUL EXAMINATION, WE ARE INCLINED TO AC CEPT THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE FOR THE REASON THAT THE COST OF STEAM IS WHAT IS TO BE ALLOCATED BETWEEN TH E POWER PLANT AND THE RICE MILL. THERE IS NO LOGIC IN SEGREGATING THE CO ST INTO TWO PARTS AND ALLOCATING THE NORMAL LOSS IN THE GENERATION OF STE AM AT 50-50 AND THEREFORE ALLOCATING THE HUSK EXPENSES AT 15.75% TO THE POWER GENERATION PLANT AND 84.25% TO THE RICE MILL. ONCE WE COME TO OUR CONCLUSION THAT 10% OF THE STEAM IS UTILIZED BY THE POWER GENERATIO N PLANT, THEN ALL THE COST I.E. ATTRIBUTABLE AND RELATABLE TO THE GENERAT ION OF STEAM HAS TO BE ALLOCATED ONLY ON THAT BASIS. THE COST OF STEAM CA NNOT BE SEGREGATED INTO THAT WHICH IS INCURRED UP TO A PARTICULAR POINT AND COST INCURRED AFTER A PARTICULAR POINT. THIS TO OUR MIND IS NOT LOGICAL. THUS THE ALLOCATION MADE BY THE ASSESSEE TO OUR MIND IS JUSTIFIED. HENCE, W E ALLOW THIS GROUND OF THE ASSESSEE. 8. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TR IBUNAL, WE HOLD THAT ALLOCATION OF HUSK EXPENDITURE AT 10% IS REASONABLE AND ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL OF THE REVENUE. ITA NO.509/VIZAG/2016 M/S. SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT . LTD., KOMARIPALEM 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 21 ST FEB18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 21.02.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CENTRAL CIRCLE-1, RAJA HMUNDRY 2. / THE RESPONDENT M/S. SREE MURALI MOHANA BOILED AND RAW RICE MILL PVT. LTD., D.NO.1-54, KOMARIPALEM, BICCAVOLU MANDAL, EAS T GODAVARI. 3. + / THE PR. CIT(CENTRAL), VISAKHAPATNAM, 4. + ( ) / THE CIT (A)-3, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM